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Grand Rapids city commissioners adopted a general operating budget for the 2012 fiscal year that starts Friday, and it may need a transfusion of almost $5.6 million from the fund balance to cover all the expenses.

Expenditures are projected to be nearly $112.4 million for the year, while total revenue is expected to reach $106.8 million. The budget's expenditures would have been much higher — $120.1 million — if city personnel hadn't agreed to $7.7 million in compensation reductions. On the revenue side, income tax receipts are expected to rise by 4 percent from 2011 to $55.6 million in 2012. But property tax revenue has been projected to fall for the third year in a row to $11.7 million.

Overall, total revenue to operations in 2012 should be down by about $5 million from the previous year, while total expenditures should rise by $3 million. The budget's fund balance will slip from $14.7 million to $9.2 million by the end of the 2012 fiscal year. Five positions were eliminated in the new budget; none were in public safety.

"At this point, there are five employees being laid off on June 30th and we have found alternative placement positions for them. This means that five of the FY12 vacant positions will be filled," said Mari Beth Jelks, city human resources director.

"Also, currently there are approximately eight vacant positions being worked on by HR. If those are not completed, the total of unfilled positions will be around 13," she added.

The 2011 fiscal year, though, should record a surplus of slightly more than $2 million. The year closes on Thursday.

The city's five-year forecast from 2012-16 shows deficits in 2013 and 2014 of $4.7 million and $336,500, respectively, before surpluses return in 2015 and 2016. Over those five years, the city will collect nearly $41 million in compensation concessions from employees and $295 million in income-tax revenue. Last year, city voters agreed to an income tax increase, which runs through 2015.

"We went to a five-year cycle so we can better appreciate what we will be facing," said Mayor George Heartwell. "The budget is a process of compromise. We debate, we discuss and we come to a conclusion."

One new and interesting line item to the budget's revenue section is called "increased statutory revenue sharing" and it could be worth $4.57 million this coming year, which amounts to about two-thirds of the city's last state payment. It's interesting because the state eliminated revenue sharing to cities, starting in October. But cities that received more than $4,500 in revenue sharing last year, such as Grand Rapids, may be eligible this year for funds from the new Economic Vitality Incentive Program.

"We received $6.7 million during FY2010, so we are eligible for $4.57 million. The $4.57 million is further divided into three pots of money," said City CFO Scott Buhrer. "The term 'eligible' is key."

The trio of money pots Buhrer referred to are transparency, cooperative efforts in sharing services with other governmental units, and lowering employee compensation. The city has primarily accomplished two of the three and plans to fill the transparency qualifier by the state's Oct. 1 deadline with a new online Citizens' Guide and Dashboard that commissioners approved funding for weeks ago.

"The city would have to meet every criteria of every pot of money to be eligible for the entire $4.57 million. There are certifications that will be required. So we would be eligible for approximately $1.5 million from each pot of money. At this time, we are adjusting the budget on the premise that we will be eligible for all three pots of money," said Buhrer.

The EVIP is offering $200 million statewide. If the city gets the share it is hoping for during the fiscal year, then the budget deficit won't be nearly the fiscal blow it appears to be now. Grand Rapids was in line to get $6.6 million from statutory revenue sharing this year until the program was cancelled. That money, which comes from sales taxes collected in the city, would have erased the operating deficit if the state hadn't stopped the payments.

"The EVIP money will be deposited in the Transformation Fund, which is where we are accounting for the temporary income tax increased revenues," said Buhrer. The Transformation Fund, also known as the Temporary Tax Fund, has an unreserved fund balance of $17.4 million. About $7.3 million of that total is unreserved retained earnings from the 2011 fiscal year.

Commissioners also adopted fiscal-year budgets last week for the Brownfield Redevelopment Authority, the Economic Development Corp., the SmartZone Development Finance Authority, and the Downtown Development Authority. Brownfield revenue should total $2.8 million; Economic Development Corp. at $130,422; SmartZone at $2 million with $1.5 million coming from downtown taxes, and the DDA at $16.8 million, which includes debt capture from school millages, non-tax income, and property taxes.

Commissioners also approved various fee increases last week, except for about $268,000 in hikes for building inspections and zoning charges. Commissioners Walt Gutowski and Dave Schaffer said those higher fees were coming at a bad economic time and were largely unaffordable for small businesses and developers. Commissioners decided to set those increases aside for now and will take a further look at the city's fee schedule Aug. 9.

"I think this could hopefully help the small-business sector and help them create jobs," said Schaffer.

"I think the business community can only appreciate the discussion about this," said Gutowski.

Commissioners also established the property-tax millage rate last week at 8.37 mills, or $8.37 per $1,000 of taxable value. For all practical purposes, it's the same rate as last year. The tax receipts go to general operations, the city's library system and refuse-collection department. State law allows the city to set the rate as high as 9.34 mills. Buhrer said most taxpayers will receive smaller tax bills this year because taxable values have dropped again.

Let the city’s fiscal year begin

City commissioners adopted the following five budgets last week for the 2012 fiscal year, which runs from July 1, 2011, to June 30, 2012. Here are the total revenues and expenses for each of the budgets.

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